 Ac mae'n amser hwnnw i'r professor Anastasiolaes Nesvatai Lowa a distinctiona o unedig yng Nghymru ym Llyfrifiddor Llyfrifiddorieto. Rwy'n dechrau'r parwyr i'r newid yma i gyfnod i'r drosi Llyfrifiddor ddifennidol gyfoes ynghyrch â sefydliadau yma. Roedd ddweud yr hynny'r byd sy'n ymlaenol arall a'r cyfnod yr hynny. Anastasiolaes yn Y Llyfrifiddor stro ddiwyd gan ddiff Whatsinidol a phre gloedol yma i Llyfrifiddorol yn y ddiff pricedoethol. Mae'r pethau mewn digun ydych chi i ddechrau eierd 알�adwyr Yn Llyfrgell Gall Ffynans, a gallwch chi'n gyfer ffynancio cymdeithasol, dysgu'r hyfforddiw hefyd pethau'n gy Gru mae'r honny yn ffynach gennymol i'r hynny o gyweithio gennymol, ac yn ddweud gyda Llyfrgell Minister Cymru yn ddweud i fynd bethau Cymru i hefyd. Fy en metres no 15 yn anestasiad erioed yn gweithio'r polsig cynghwilll i'r raddau S wildfyniad Seifol yn Gwllfa Gweinig Mae yma'r bookau gwahanol i fyny i gweithio yma yn ymgrifennu amser hwnnw'r trefwyr yn ymgyrch, trefwyr bod yn ymgyrch ar unig sefyllfa ar yogi, ac yma'r oed yn ymgyrch, fel ysgrifennu a'r cyffredin fan ei fod yn ymgeithio ar yr Unig Ion, ac yn ei dweithio fyfwyr ymgyrch. Yn amser gael ymwraith ar y cyfrwyr, ymgyrch yn ymgyrch mewn cyfrwyr. Wrth gael, dwi'n g competent yma iannau ac efo yn anestacynau, y gallwn ymwneud â gyda'r adeiladol yma yn ysgol gwahanol, a'r adeiladol yn ddwy'r adeiladau. Mae'n gwneud y maen nhw'n gweithio gwaith sy'n ddwy'r adeiladau. Dyma mae'n meddwl o'r adeiladau. Hefyd, ddwy'n gweithio ar y gwirioneddol, ddwy'n gweithio ar y gwirionedd yma, wrth gyrfa ymlaen y tro, i'r adeiladau o'r adeiladau o'r adeiladol, fe wrth gyfnod, drwy'n gweithio ar y lab, I thank you for Matthew to agree to discuss my paper. I will have to say that there is no particular theoretical framework that I would want to put forward to you. I'm not proving a particular hypothesis. I'm just laying out the state of affairs and some dilemmas that confront an authoritarian leader of quite a complex country. Towards the end I will have three scenarios of a potential development or resolution of the current situation. Before I start, this is me. No, you better look at him. You already know who I am. Before I start I have to introduce this piece. Russia in the literature, clearly as a political economist, you analyze either capitalism or a state-market relationship. What is interesting is that in the academic literature the Russian state has been known to be a modern state. It has a constitution, it has a division of powers, it has a relatively developed set of institutions that represent a democracy. It is known as an oligarchic state, as a state that was made for oligarchs, that was made by oligarchs, that is now governed by a different type of oligarchs. It is also known as a mafia state. It is actually a term used recently by one American scholar who associated with the personal role of President Putin and his connections and the connections of his entourage to essentially mafia networks to organize crime. Most of them centered on security channels and KGB. Crony capitalism, one description, sovereign democracy, another description. Petra state, a third description. And although we can debate every virtue of each of these concepts, one lesson that comes out of a good analysis of the institutions, the demography, the political economy of Russia is this. Russia is not a classic Petra state. It's not a monarchy, it's not a Middle Eastern or Gulf state. It has a very developed institutional framework, it has interesting demographics, it has diversified labour force, it has a very educated population. But always and everywhere for the past 20th century, its key dilemma was how to overturn its dependence on oil, or oil exports more specifically. And this is the dilemma, so although this is kind of always a strategic ghost haunting any leader, to be honest, if you start looking inside the Russian economy, it's, as I'm saying, it's not a Petra state, and there is an institutional and social and political framework that makes things evolve in a ways that are not necessarily coincide with predictions of major forecasters or policymakers or politicians who want to deal with Russia on the international stage. So let's roll. The common story of the current crisis, and there is no denying of the fact that Russia has been in crisis since 2014, if not since 2012, is something like this. The glory years of Vladimir Putin and his first two terms in power coincided with the windfall of oil revenues. And during that windfall, his regime, his partners in power, globally expanded Russia's geopolitical and foreign policy ambitions. In 2003 he was himself mentioning Russia joining NATO. In 2007 there was a talk of a big Eurasian union that was straight from Lisbon to Vladivostok. So the rhetoric of Russia being a global player was very much not against and not as a counterpoint, not as a reactionary to existing power structure, but very much as a member of maybe a potential partner. But very much, you know, it's very friendly if you want very liberal discourse of geopolitical choice. At the same time, sometime around 2008-2009, certainly reinforced by 2012 presidential re-election of Putin into his third term, things coincided, domestic shifts in power, shrinking revenues from oil rent, certain marginal changes in satisfaction of the new generation of oligarchs. They coincided with Russia feeling betrayed by the West in several of foreign policy adventures, in particular in Libya. And it goes back to Reagan and George Bush Jr, who once had signed particular treaties, they never really fulfilled it. NATO is expanding essentially to the border of Belarus. So it all makes the liberal clans in Russia a little bit less secure. And it makes the Siloviki, the power and security and the military forces a little bit more aggressive. So around 2012, just as the Libya deal was mishandled as far as Russia is concerned by the West, the Siloviki part of the power entourage of power clans inside Russia said, OK, that's enough. We have had enough of experimentation with being a junior partner or an aspiring partner to this global order. Let's take things into our own hands and show them what we can do. And specifically, if you're interested, the issue of Libya was that Russia agreed to a no-fly zone of intervention, whilst in reality the operation quickly became a much more grand offensive and a regime change. So, since 2012, there is an active building of something called the Eurasian Union, which I don't have the map, but it's basically, it's a little bit of a reincarnation of the Soviet Union, minus the Baltics and minus some of the Central Asian states. The active participants in it are Russia, Kazakhstan, Belarus and Kyrgystan. Currently New Zealand wanted to join, but of course the Eurasian bit, the Euro bit here had a gem, and that particular gem was Ukraine, the largest of the Slavic Republic's apart from Russia, with access to the West and to the sea. At the last point, this didn't work out. It worked out in a very different way to the dissatisfaction of Russia. Ever since then, Russian aggression towards the Ukraine and the Crimea thing has been punished by diplomatic tools. The rationale behind the sanctions, which in addition to lower order avenues remain the key financial weapon of, let's say, the West, the European Union and the United States, is very simple, and you can find quotes about it in New York Times and some speeches of people who were working for Obama, is that the oil dependent Russian economy cannot withstand the economic pressure of A, international financial isolation and B, lower order avenues, and over time the power base of the current regime in the Kremlin will collapse. That was very much almost word for word up there in 2014. The calculation is this. This is Russian export, and if you can see there, can I point? Yeah, I can point. These are hydrocarbons. About 74% of whatever Russia supplies to the world markets is oil, gas and other burnable stuff. The rest is miniscule with a little bit of chemicals, a little bit of 4% of machinery, and only 1% of food and grains. This is the country with the largest territory in the world. I took the statistics before the Ukrainian conflict before the sanctions. So the calculation is clearly kind of makes a lot of sense. So yes, oil and gas are a major export item, very crucial for budget revenues. They compile about 50% of overall budget revenues into the state, and therefore eventually it will eat into the existing support for this annoying regime in the Kremlin. My point to this relatively mainstream debate is this. Russia's fragility is first of all not even about oil as such. What happened is that under the years of Putin's reign since 2002, up until today, Russia developed quite a sophisticated network of subsidies, transfers uninstitutional support, essentially fiscal, to the regions that makes its economy relatively diversified. Oil and gas employ very few people proportionately, and although they are major contributors to budget revenues, structurally it's not a very employing economic sector. So instead I focus, there is a paper background that Matthew has printed out, I focus instead not just on oil or energy dependence, but on three key areas of Russia's mode of international integration. One is the exporting or rather export-input mode of the country. The second one is the word that I kind of don't know. I'm skeptical about the virtue, but let's call it financialization, and up until recently it has acted as a boost to aggregate demand and consumption. And number three is a specific and unique mode of integration into the world financial network, the dominance of offshore in channeling money into Russia, and channeling money out of Russia, offshore that I mean tax havens. So this is the point that is supposed to illustrate my most conceptual, my most deep insight, is that Russia is not just about oil. This is the structure of the country's GDP sector by sector. And you can see where is oil here, now it doesn't work. But essentially if you read carefully through various subheadings, you will see that this is quite an advanced service-based economy with transfers, with contributions to budget, with drains on the budget. But really this is definitely not a very skewed petro-stay. Although nobody will deny almost one-to-one correlation of the Russian rubble to the Brent oil crude price in the world markets. And this is specifically the graph that illustrates Russian GDP as a blue line and the yellow line is the world price for Brent crude that Russia exports. And you can see they move in very nice correlation up until now. Okay, to counteract or as a lesson from its previous crisis and the latest crisis before 2014 or before even 2009 was the 1998 default. And since then the Russian policymakers have learned their lesson. The lesson was that it's stupid to keep the exchange rate fixed. It encourages a lot of unnecessary risk and also ties the hands of the central bank. And B, you need to have foreign reserves to be able to do strategic stuff in the rainy day. So they've used the first 10 years or 12 years of Putin's reign to accumulate those reserves. They are split across three various funds. One is the normal reserves of the central bank and other two are strategic funds. They are designed for national welfare and national prosperity or national reserve fund. They have been used during the recent crisis and I saw that a large chunk of withdrawal from one of them just happened in the last few months to compensate for fiscal deficit. But they are still there. Apart from, well, the sovereign buffers in the central bank are draining but the two strategic funds are still there. This is the central bank reserves. It's been dwindling down towards the end of 2015. And sometime I think it was the, let me remember, it was 2015 when the governor of the central bank decides where no longer have a pegged exchange rate. We let it float and the ruble crashed. And it very much kind of, it appreciates a little bit back but it still is very much lower than what it was in the glory years of Vladimir Putin. I have to apologise for this particular graph because I was doing it manually and it's back to front. And I don't know how to reverse it. So you have to read it kind of in Arabic Hebrew way from right to left. So it starts from 2008 and finishes with 15. And you can see this is the early days of post crisis recovery. Then it goes up in correlating with, you know, super oil revenues. And then it starts dwindling a little bit towards the current crisis but it's still very much there. This is the national welfare or wealth fund. Sometimes it's kind of used for naughty purposes to support a particular corporation or state corporation that is too friendly. But essentially this is the state reserve that is there for the state to support population on the rainy day. All this suggests that the current, let's call it still crisis but just it could be stagnation or recession would not follow this V pattern. This V pattern was deep and it coincided with 2008 and 2009 but the country quickly recovered already towards 2010. What is happening now is that you see already dwindling growth from about 2012 onwards. And now this particular line will be either fluctuating around zero and I read today the latest statistics, Putin himself projected that the GDP will shrink by 0.3% this year only. So this suggests that in fact you are no longer in another crisis. This is a period for a country to confront its demons if you want and it's a period of a much longer stagnation and possibly reorganisation politically. Another weakness is not just the exports, it's what is happening inside. And in particular it's the pattern, it's not even the pattern, Russia imports everything or at least up until the sanctions it was importing everything. In certain industries the share of imports reached 70% to 90%. The example that circulates around in the commentary to analytical stuff is that if you buy a tin, a food tin, a can of tin, a can of food tin in Russia or Russian food and 90% of that tin will be imported including the paper app with a nice logo and pictures because apparently the Russian economy cannot really cope with such sophisticated technology. Of course when it was easy and cheap to borrow, you borrowed and if it's too risky to reorganise your production inside and invest you don't really and instead you exploit the same reserves or the reserves, gas reserves and the same facilities that was there even in Soviet times. So kind of Russia went into the 2014 crisis with a very skewed balance exporting the burnables and importing pretty much everything else even including in stuff produced in Russia very much like what is happening with Brexit or we discover that is happening with Brexit. Even for Russia made goods the ingredients would be imported especially on technology and high tech. So Alexei Kudrin who once was a Minister of Finance now he is a kind of chosen leader of the liberal economic opposition officially chosen, he is a system opposition says that essentially there is a model of growth you cannot say that there isn't and it's not just an ad hoc channeling of oil it's a model where oil exports and revenues from oil exports are being used to facilitate aggregate demand and there was a big consumption boom there was a big building boom there was a big consumer boom and a credit bubble inside Russia already evident in 2012-2013, nothing to do with the sanctions. At the same time what happened with high oil revenues is that the presence of the state and the state-centric economy expanded massively When you asked graduates even in early 2014 where would you like your future job to be most of them wanted to work somewhere in state bureaucracy or a state corporation kind of the big network of state linked things. Now when you ask them I think every second or fourth of them actually wants to leave the country but at that time the choice was to work for the state not really for the private sector certainly not to start something new. What also is happening is that the expansion of the state of course leads people and overall it's not just civil service it's everything has expanded massively since the collapse of the Soviet Union but it has grown twofold compared with staff engaged in research and development and for example academia of higher education. By the way so I probably don't see the purple line is civil servants excluding army and security services so army and KGB, FSB anything to do with any other security doesn't count this is just pure sort of bureaucracy civil service. They started at 121 in 1995 already post-soviet union already under Yeltsin and they gradually diverged so this is the human capital the intellectual capital with which Russia confronted the crisis. So stuff in R&D is this what is it, under 800 and almost twofold is the kind of the big people employed for the state, by the state or near the state. The beautiful economic trick of this I don't know how many of you are economists is that of course if you are employed somewhere around the state or near state channels your currency is in rubles so you don't really care or politicians don't care how you react to devaluation of the ruble you just get rubles so you don't go on foreign travel or you don't send your children to international institutions or summer camps and it allows them to keep employment so as real income shrinks but you don't lose the job so unemployment in Russia is uniquely actually consistently low partly because of demographics. All this is stapled together by interesting social contract between the political elites the ruling elites if you want the oil elites the petrol elites and the society. The contract in a very non-sophisticated and a theoretical terms sounds something like this they the elites and this can be anything the original oligarchs from the 90s the first generation of let's say St Petersburg, Stiloviki oligarchs that came with Putin in early 2000s essentially they are children they are more technologically oriented third generation of all this maintain power by enriching themselves they steal everybody knows they do but that's fine and they are working resources but they do it in the name of the state and that's fine because as one member of my family told me when I kind of presented some arguments to him but that's okay at least they do it for the state they made the country great again ordinary Russians got wealthier in the first 10 years or 12 years of Putin reign massively wealthier this is unprecedented they do not remember life as good ever their parents still remember Soviet deficits their grandparents you know they're still scared of post war adjustments but nowhere Russians were part of the global middle class you cannot really distinguish them if you're on Alpine's key slope exactly the same possibly with more colourful clothing and they share the patriotic rife but importantly do not engage in active politics in fact the only time they tried to do it in 2012 when Putin's third re-election was accepted reluctantly or some people didn't accept it turned out to be very painful for many of them so this is the social contract academic literature suggests that there are more clever terms for this there is one term comes from Richard Sackwer who works in Kent and he calls it a shadow state he basically says that there are sort of two structure two functioning structures of the state in Russia first the formal constitutional modern state with all the normal divisions of powers, checks and balances the separation of the executive and the legislator at the same time there are shadow state structures to do with signals and leverage and tools that are used by the administrative resource by the silover key for a particular distribution of resources but they are unseen they are kind of there up in the background another person who writes about one aspect of the social contract is Eleanor Lediniova at UCL in Europe's system across the road systema is a vertical of power it's very similar but more sociological interpretation it's a vertical of power where a lot of channels of administrative pressure a lot of leverage gained through particular practices used to send power signals it's very understandable but not articulated so everybody knows it's there but nobody is really prepared to send it down or indeed challenge it instead they use it and this is my kind of artistic take on the state of affairs but please forgive me we are moving to this so this is the kind of the political economy and the social contract weak however diversified in which the state has grown and state interest has grown but also potential divisions and conflicts even within the oligarchic elite for example or the state centric elite are potentially higher because resources are dwindling with lower oil prices your end is actually lower financialisation came as part of globalization and contributed to that feeling that Russians have never really been wealthier than for example in 2007 or early 2008 there's been a massive credit boom fuelled partly by thousands of Russian banks and Russia has thousands of banks most of them are useless and they lose their licences by the dozen overnight because they are either corrupt or they steal money or they are used for somebody's enrichment but it's not a very efficient banking system still because big banks had access to international funding that helped fuel the lending boom inside and Russians borrowed to own a new mobile phone they borrowed just to borrow and so for example there was an outstanding what is it indebtedness from 10% to 40% of GDP nothing extraordinary by international standards but significant in historical terms for Russia interestingly at the peak of the idea that Russia is a great power again and we can afford it and this is the new economic miracle about 30% of all loans were in foreign currency in dollars and middle classes actually they were borrowing in dollars to own a flat of course it would crash in 2014 and these foreign currency mortgage holders would be very very unhappy and express their satisfaction and again in 2012 there were relatively modest share of unsecured loans to households at 9% of GDP nothing nothing dramatic by international standards but dramatic enough for a relatively fragile and concentrated banking system that would now have the sledgehammer of international functions the banks would not have access to international funding they would be simply cut off so as a reaction to that they will have to roll back some lending, they will have to call in the delinquencies and bankruptcy would put their eyes one casualty by no means a last one in fact it was one of the first ones or the biggest in somebody called Trustbunk the name tells for itself and they had enough cash results to pay Bruce Willis to be the front man for this so they actually went bankrupt I think in December 2015 but again it was one of the many early birds of a bigger storm to come so the Russian banking system was really hammered by the crisis but the weaknesses there had been brewing up since long time before at the same time although Russians borrowed for consumer protection for consumer consumption for mortgages as a fixed capital or as investment into fixed capital sorry this is in Cyrillic but essentially nobody was investing the grain line is the overall volume of investment into fixed capital the orange one is excluding the seasonal factor and basically the thick line is the trend it's been basically going down and all stagnating some infrastructure projects which are so beloved by politicians because they're very socially friendly are being done but then some of them have absolutely no logical rationale why do you build a very expensive bridge between for example two remote islands if very few people actually live there and there's practically no economic activity in either of the islands so clearly this could be interpreted as part of the arrangement for their friends or colleagues who are very close because they got the contract they want the tender they are diverting the resources from the main federal grant but some of these bridges were built but many roads remain unrepared and finally what about other sources of capital Russians got rich so surely they should be able to invest in the economy they do this is the list of FDI flows into Russia by country of origin and you can see that number one here in 2012 and 2001 is something called Cyprus number two is BVI British Virgin Islands number three is the Netherlands and then Ireland all major tax haven jurisdictions with Cyprus being the first stop to having an envelope of shell companies where essentially Russian capital exits cleans itself out and then comes back another graph would illustrate to you almost a one-to-one relationship between the money coming out of the country and money coming into the country so this is 2011 presumably quite a benign year so FDI into Russia first Cyprus, FDI out of Russia Cyprus the number matches almost to the dot then Netherlands and then the BVI so the first three is the same then it breaks into Bermuda Bahamas but Switzerland and Luxembourg channel money back into the country how are they doing it this is one common scheme a Russian company belongs to a Cyprus mother the Cyprus mother gives this Russian daughter a loan and this loan is fake now it's just a particular contract or something that needs receivables it could be a right, a royalty or a license or permission then the Russian daughter the Russian company sells actual products in the Russian market where the actual economic activity takes place and earns revenue however most part of this revenue goes to paying of the Cyprus mother because of course it's a loan and the loan needs to be paid back either as an interest or as an interest as an payment or as a fee for whatever activity was licensed as a result the net profit from the Russian daughter is minimal whereas most of the sum goes to Cyprus of course it's not taxed by the Russian state another scheme is through exports a Russian company sells products to a Cyprus firm at a low price no products actually change their physical location but there is a paper trail the Cyprus company in turn sells products to the final customer at a higher price no products change place between the three jurisdictions but there is a paper work showing that now there is more money under the Cyprus ownership in reality these are only recorded paper transactions the products actually go directly from the Russian consumer to the Russian firm but they are not taxed by the Russian authorities offshore jurisdictions also have helped to avoid the sanctions this is one scheme put up together by the economist as to how one of the first banks that got sanctioned apparently close to Putin essentially how cleverly they distributed the ownership and because of the tricks in particular ratio of ownership they are now not part or under the sanctions I have to say that Putin declared a massive de-officerisation campaign in the country it concerns civil servants their relatives, family members and anybody who wants to conduct business it's been moderately successful some people have declared their tax returns but also people quickly understood that there are ways to have a particular seasonal tax residence in Russia and then to be outside of the country for most of the time then fall under the new regime so the dilemmas of all this is that the main instrument so far for addressing this kind of the political economic crisis have been Russia's sovereign wealth funds these reserves are prone to being depleted but some are still there and some painful choices about which industries to support for example which firms which sectors, which owners will have to be met the decisions will produce and in fact they are already producing their own winners and losers and may add to the already present drifts in the ruling elites around the Kremlin and if there are any Russian watchers who are following what's going on there has been quite a massive reorganisation of some of the key figures both on the Silovi Ki clan and the kind of liberal economic clan most famously with the arrest of the Minister for Economic Development for a bribery of $2 million last week quite a extraordinary development I don't remember ministers actually I know governors who have been arrested I know some I enjoy but a minister for economic development one of the liberals one of those who are inherited from the initial perestroika, not perestroika but the Yeltsin team is now under I think house arrest yes I said already I'm sorry the deepening financial crisis is deepening it's not been helped by a very strict and severe stance by the central bank who is using any opportunity to clean out the system from inefficient or corrupt or fraudulent elements in fact they do raids at night so that nobody can trade inside information to hide something so a team from the central bank would arrive in your bank office or in your bank affiliate at night sees everything and in the morning you'd learn that your license has been revoked in fact the only element of the Russian economy apart from kind of access to offshore although it's also a little bit undermined by the global pressures against tax havens remains the relatively robust social contract between the ruling elites and the population what is interesting is that I keep saying that the elites themselves are quite divided so when you when you want to see kind of the more this is the Shiloviki clan but then of course put his closest ally Medvedev the prime minister is supposed to be the the more neoliberally minded economically progressive person who is in charge of actual implementation of economic reform and stabilization packages so there are the rifts between them always existed they intensified around 2012 and you can see how essentially putting is not really a dictator or you know a tsar he serves as an arbiter between the two clans and usually it's a chess game of punishing somebody from one side and then giving something to another side but that's about domestic politics I'm happy to go into questions so with these divisions around the elites with the structural economic weaknesses inside and with the still robust social contract between the elites Putin and the population I see three scenarios developing in the near to medium term let's start with long term and this was preoccupying a lot of people back in 2014 especially as Russia seemed to intensify the isolationist rhetoric and pivot away from the west Russia is supposedly developing a new type of friendship and collaborative relationship with the Chinese it is saved by China and it becomes a satellite of China a resource satellite and a territory satellite this more just starts a global realignment of powers and geopolitics I'm quite skeptical about this particular vector although it's clear that China is an important regional presence and it's very important financially and economically it also has its own ambitions for some of the territories and resources but it would not be an alliance of equals it will always go according to Chinese demands because they prove to be much shorter negotiators the famous gas pipeline from one of the Siberian cities to China still I think it hasn't taken off because the Chinese are very reluctant and it will actually be quite unprofitable for Russia and once I read that the estimate is that it will take 30 years for the pipeline to actually turn profitable so and also in terms of you know all this pivot away from the west the bricks become a new player there is very little coherence around the bricks overall and even between Russia and China there is more than disunites them than there is that unites especially in the collective vision of let's say soft power hard power or even multilateralism rejected to the world stage scenario 2 short term the Kremlin attempts to resolve economic crisis by entering into another war conflict this was written, I have to say I left my fresh use bistic in the office so this is a little bit behind so clearly the Kremlin is using an external conflict fueled by military or security considerations to essentially divert attention away from the economic or social problems there have been some speculations that there will be an internal rift with security or national militia but Syria came to rescue and the big gamble is of course under Trump what will happen and my calculation is that Putin will try to gather sanctions lifted in exchange for partnership around Syria and Assad will stay scenario 3 long term Russia returns to the western fold and modernisation path because any historian will tell you that any progressive modernisation any sort of economic reform and any move towards enlightenment only came to Russia from interaction with Europe and not from any partnership with the East or China this can be the outcome of putting the remaining leader or not and on this provocation I guess I will end Thank you very much I'm going to hand over to Matt but before I do I forgot to say earlier that I have a tweet about today's event the hashtag to use is sowas dev studies so handing over to Matt Great, thank you Thank you, Nithia and I would like to be part of this development seminar series and it's wonderful just to offer some initial thoughts on Anastasia's presentation and I'm really pleased to be a discussant on this a number of pieces of your work in terms of work on financialisation the shadow banking system in particular and I'm with you on the importance of Minsky and wider questions that you've studied on governance I'm not a Russianist though so my remarks are not going to be as informative and as penetrating as Anastasia's has presented to you but I hope that it will offer some avenues and some prospects in terms of the debate I think overall I think that this offers a really valuable corrective on some of the conventional depictions on Russia in its ongoing financial crisis and more broadly in relation to its political economy in general and as she outlined it can test a common narrative that I arguing that the major source of structural vulnerability for Moscow lies not just simply in the volatility of hydrocarbons that is also how the economy has become financialised and how that has cross-border effects and I think it prosecuses very well as you've seen in terms of going through the relevant data political problems about redistribution of export revenues increased role of the state all the way through to these processes and effects of financialisation my remarks and further thoughts grouped around five sets of points which some are directly on the paper and others are hopefully spinning off from it so one was on the points that were raised about the diversification and the overall structure of the economy and and you spoke about how there have been moves towards diversification and one in comments was on how there has been attempts at this my question was why have there not been what was standing, what you were saying in terms of the structure in terms of contribution to GDP in terms of sectors but why have there not been more efforts or should one have expected more efforts at diversification when reducing dependence on imports as a way to enhance that a second theme and I think this really comes out really great in the paper is this fascinating story of the capital flight and the offshore nexus of Russian investments and I thought that was all intriguing those strategies that we used there one question I had on this was just coming back to more the question of the awareness and monitoring of this and you speak about how Putin has been installing this anti-official or drive but again it's a question of you say that it's had some degree of moderate effect perhaps you elaborate a little bit more on are there alternative politics going on underneath that or is that the stated goal at all times a third point I think was just something which you didn't have in the paper which I thought was something perhaps you could comment on is the relationship between land and financialisation and in your paper you made the point about how some of the Russian capital is channeled offshore finds its way into Fritz's property in London and elsewhere and so forth but do you have anything in terms of how there has been significant reform of domestic farm land or land grabbing I was just wondering whether you had is that of an interest to your story in any way or would you say that that's not as significant in relation to the larger story you're trying to tell so I'm just intrigued about how we can understand the relationship between land and financialisation and forth is just turning towards the forecasts and scenarios you map out and this is kind of you had a few ad libs on this I was just wondering about the banking sector again and do you think that there is is there some relative stability that has emerged as the banking sector or is this still an illusion and is it still vulnerable in an environment of low growth and external vulnerabilities and a final point is a more general one whenever I looking and trying to decipher Russia I just come back again to how can we understand different strategies of power in trying to make sense of Russia on this I was wondering out of your studies of contemporary Russia do you think that you've discerned anything about how we can understand power and power strategies more generally as a way in which we can see patterns of political behaviour I'm just thinking about how difficult it is for observers of Putin to accurately judge his intentions and one technique of power is to be to be unstable to turn the other way to be unpredictable and so I was just wondering whether you know can we learn anything more generally about power strategies for your case straight wow ok diversification moves towards possibly the easiest of the questions that you Matthew thank you very much of course only an idiot when he is elected into power doesn't want to diversify the economy and has been part of official governmental programs ever since probably 1999 at least why not more moves why it was much cheaper to bleed the two veins gas and oil and it's also much cheaper to actually import the rubble was overvalued officially maintained again prompted by revenues it's not to say that it's an entirely a story of economic collapse if you go into if you go on Amazon you can buy some of the Russian cosmetics it's organic produced in Siberia it's very good you know shampoos included you can buy some very nice leather natural children's footwear unfortunately you cannot easily import it into your UK but it's there so there are some pockets of course there is Kaspersky there are some pockets of you know some hope and excellence but they are you know the exceptions rather than the rule but the big incentive is why you know if you have this vast apparatus that already works ok so the mechanism of control subsidies transfers it works it belongs to the state or it's near the state or it's a state corporation and you also know clearly it requires some sort of it requires greater presence of private ownership and private ownership although the very foundation of capitalism is quite dangerous in Russia things can be taken away from you if you're a private owner so as a as this very banal incentive to you know let's do it let's recreate a new incentive structure and let's work it doesn't really work because of the it's a regime it's corruption it's the existing facilities that are already out there so overall the balance of things didn't really work until the sanctions what the sanctions did is that they turned some of the import dependency into an opportunity so one of the few sectors that grew since 2014 is agriculture suddenly Russians realised they can eat Russian apples and not necessarily Polish seems to be ok they start to sell more to the near broad and pharmaceuticals that's another sector that sort of and there are also some regions with relatively advanced to the Russian extent infrastructure that have really benefited from this artificial it's not even the sanctions it's the counter sanctions that's protected that served as protectionist matter and everybody seems to essentially like them the counter sanctions worked worked well for the Russian economy but the financial sanctions and technology sanctions imposed on banks and corporations don't really work or worked but you know to the loss of the Russians capital flight awareness monitoring I can say you know it's difficult because it's so deeply entrained the main motive for western capital flight when you have the use of offshore here is essentially you evade or split your profits you fragment your jurisdiction so that you're not taxed in a particular high level jurisdiction in Russia the main motivation for using offshore zones is the concealment of the true ownership because nobody wants to declare what they have it's not so much about paying taxes it's about hiding what you have or your wife or your niece has so I think there is some understanding in the business bureaucratic community that the Kremlin is using it as an extra tool of control so that now everybody will declare whatever they have and it will be another leverage instrument to play around between competing factions London financialisation I don't have anything to say on that apart from the first argument that it's also a little bit probably dangerous to own a particular type of land and also it's still an abundant resource in Russia let's say if you want what do you do with it so you have a piece of Siberia but unless you have investment flowing in it's a bit useless banking sector relative stability I think there is a big stability that is kind of a mirror image of western stability the retail banking is essentially state backed the biggest bank it's a state owned payment system to do again as a response to initial imposition of sanctions has been built as a Russian network not relying so much on private western companies so there is some stability to that and some Russians are still trusting their savings to the state bank but as an area of activity as this part of the service economy there's been massive cleansing of the system I'm not sure all the potential for fraud and corruption have been chucked out but it's been going on for at least three years strategies of power wow the key distinction possibly would be between Putin or the regime, the Kremlin using tactics vis-a-vis strategy and there is a lot of confusion in the west because very clever tactics are confused for strategy whereas in reality there is actually no strategy when they talk about soft power a Russian vision of a world order a Russian counterpoint to the west it's actually nothing there is no coherent ideological, political vision for a new better world whatever they can offer on RT24 or whatever it's called it's essentially a counterpoint to what it's there it's a reactionary and not that it's not entertaining but essentially it's always a reactive and therefore passive response possibly you can say that about a lot of BRICS countries whereas on tactics the key you use greater uncertainty and stability that's great, that works I think it works also in domestic politics to generate certain fears or protect or expose certain weaknesses and I would not be afraid to say that some of it is pure sabotage of each other in terms of business rivalries or political factions they often play against each other and there have been cases in recent history where let's say there are two big what is it called you know lords controlling the security apparatus they start a public war between themselves and then putting sex both because in the war against each other they destroy the reputation of both and so both ended up outside the political sphere so that's what my take is soft and hard thank you very much can I have a show of hands for questions if we want to group them together yes let's start by doing that so gentlemen over here please okay great so hands around gentlemen okay should we take one more question for Alfredo okay should we take one more question for Alfredo what is the West why is it that since the early 1990's there has been an unlimited hostility in the West in Russia instead of choosing especially if I was supposed to make this thing for choosing they want to drive later how would they dominate you that way makes that the option has been to try to be in Russia now it has a mystic rivalry and it goes back to who is this what about the political sphere how should I know this when I look into it is it a political sphere is it a populistic state is something what are we witnessing is that the first of this in ways of of political career of its own leaders so okay great what's it Estonia my personal answer is I guess you already said it's in the rational sphere and I completely agree I don't see Russia going on adventure in any of the Baltic states it has absolutely no business there and it's expensive and Putin actually doesn't like uncertainty or reports suggest when Brexit happened and his soldiers came and said Brexit we've done it he said you idiots do you realise that this will be very tumultuous and uncertain but there are in my native Belarus a Moldova or other states that will now be price assets for a tighter European Union a European Union out of without the UK there you can see some tensions maybe they will not be completely hot of military but you can I see that as a zone for problems rather than the conventional Baltic states although they like to make a lot of noise I know it's profitable Moskovsky comes a while it's I don't know it's a tabloid sorry I think it's fine so it doesn't matter but it's we can speculate maybe he will choose a beautiful exit and publicly marry his gymnost girlfriend that's my personal speculation that's how the relationship has been kept quiet so this provides a very beautiful, very understandable way out and then Medvedev inherits because he's seen the consensus few in the commentariat that he's the ire the legacy partner interesting one of the early contendants for the presidential post which was Sergei Vanolff was recently ousted into he's now chief for environmental refurbishment somewhere and he was a military minister so I don't know but I actually don't see even if there is an official exit or a change the presence will still be felt it's not really it's not so much about the personality it's what the personality represents about the institutions Alfredo, three questions sustainability of the national project I'm not sure there is a national project that's the whole point yes, economy is weak it's kind of possibly it fed better than everybody thought initially after sanctions were imposed but there is no national project nobody is asking the annoying questions about for example demographics the Russians are literally dying there are simply not enough people being born they die young there is a half of a country and populated that relies on migrant labour it creates a whole pot of unsolved problems nobody is really tackling it there is also an issue that even if you are original power you are supposed to have good working relationships with you near abroad but now if you look around there are many unhappy people borduring Russia and it will go through generations so what's the national project apart from rejuvenating some Soviet symbolism can you offer them as a future so a lot of Russian project wise it's all about the past and the past glory but very little about the future the person who tried to be about the future Yeltsin or Gorbachev they are both equally hated I had one debate he wasn't even a taxi driver he was giving me a lift but he is a professor in high school of economics and all of a sudden he kind of ah, I'm not sure who Russians hate more Yeltsin or Gorbachev really? and it was actually 2014 the West conspiracy I don't think it's a conspiracy by the West but a completely lack of understanding and I guess maybe in practical terms it means few stuff working on Russian desks Russian studies or post-Soviet studies being not as glamorous as Middle Eastern research but it's a I did I press some but it's a it's a problem in foreign office for example they don't have enough people who know maybe initially it was a conspiracy when they didn't know what to make out of Gorbachev but so long into the trend it's just basically lack of engagement some countries are doing better than others Italy or France traditionally but yeah Putin regime I would not there is common rhetoric and it runs across popular academia of personify with the country itself and I wouldn't do it I would simply call it authoritarian regime and my argument goes back to 1998 when a financial crisis was essentially a crisis of let me call it new liberalism in Russia where suddenly Russians really really understood that they hate the idea of private property they hate the idea of private wealth they hated the oligarchs they hated the Americans that did hate Elton so there was a very ample opportunity to create a Putin it happened to be this Putin but actually it could have been anybody so much less about him although he plays up to the role clearly but it's traditionally an authoritarian state where apologies to all Russians or Slavs in the audience a human value or a human being is absolutely worthless and this is what the state, society or church will tell you through centuries you as an individual something that is so fundamental to western capitalism and democracy you are not worth anything a bigger common objective be that a Stalin revolution, war, a compatriot whatever the national project yes but you as an individual are absolutely disposable and that is the core of the problem and I don't think it will take several generations to possibly start to challenge that round two a gentleman here there were many broken promises so what's your point all hope lies with Trump possibly and less orange let's move to the second question come back to this afterwards good job just share it a little bit more in terms of that particular other general just I'm not sure about that but I think things don't change in terms of variables of society one more question gentlemen back okay great okay so Paul did I answer your question? yes I did graduates leaving I think the normal considerations for demographers are running various charts historically where people start to leave the country and they do coincide with the economic crisis part of it is a completely professional choice so now Russian engineers will get more paid in Silicon Valley or somewhere else and it's an issue of globalization they are fairly political, they don't care they are quite immune to political organisations for example the whole IT class so they simply leave because incomes have shrunk inside the country in terms of young people whose fathers are not oligarchs or KGB people I think it's a genuine concern because now that the new owners of capital the people who are in power they have something that distinguishes them from Soviet elites they can pass the wealth down officially your son or a nephew or a daughter can now be the new owner of your own, let's say a little oil company something that the communist elites never had so as that particular space shrinks yes there is a survival understanding and maybe some of the middle classes I have these students a lot of them are really anxious to go back after graduating from here and I don't blame them they are global citizens although some do share with the patriotic drive and the whole kind of rhetoric I have to confess I don't know about the trade deal in non-dollars so a source would be appreciated I don't know I would venture to believe that it's a small volume and I wonder with which country they actually signed Putin approached China why does he need to approach China if he can just sell his own reserves of treasuries he can start the onslaught for himself but also why would he do that if all the reserves in all Russian sovereign wealth funds are denominated in dollars so all these conspiracy theories to me as a finance person they are quite really, really you want to crush your own sovereign wealth fund the dollar which is the only this is where they keep their wealth this is the chosen currency for safe haven so I don't think the interests are not aligned with that balancing act in the air not necessarily in the air and there have been some initiatives to fatten up his own support base recently with the new security kind of guard being constructed the national guard that is only answerable to him so presumably to counteract anything from more established security agencies or maybe to help with any uprising or maybe to sort out such naive necessary but I don't have an interesting answer to that he has somebody who has grown into the role and he has been used as the arbiter by existing power clans but they have high vested stakes and it's funny but a lot of highly educated people close to various elites they still tell me well it's because he doesn't know if only he knew what's going on if it's because they don't report to him or they lie to him really if only it went up all the way a problem will be solved right okay final round of questions gentlemen up there great thank you any other yeah this gentleman here okay and I saw one several hands up idea over here it's very basic one has to them a way that the end or of these women people great should we try and fit the rest into it see how many more hands there are just this gentleman here yeah okay right thank you any more questions okay put in a puppet I think some of the elites would like very much to see him as a puppet but I don't see that he's also not a soul decorator he makes decisions with some with still a sense of being accountable although it's not a not a western type of accountability where nobody is above the law it's certainly now Russia's rule by law but not of law so that's that's how it's described and then I guess I would I'm not sure he's a visionary leader he's also a leader who traditionally hasn't been that bothered with economics he wants to he's more of a big player guy sitting on the table with Marco and Obama but economics is delegated to other people so because of that and he values loyalty so loyalty he's generated through giving access to a particular group or family to a stream of income so no he's not entirely a puppet but the kind of he's managing circumstances very cleverly to what extent it's stretchable infinitely I don't know he's certainly preempting a lot of a lot of dangers of people around him the loyal ones are preempting a lot of potential dangers to him and he of course has the massive popular support 80% rating is not something that you have easily there was also a basic question about let me handle Eurasia it's there, it's not even a scenario it's already there but in terms of being part of the global economy it's absolutely insignificant together they might make up less than 3% I think of the world market you're talking about the world's largest country and the world's ninth largest country being Kazakhstan who I found out by personal research in Almaty doesn't produce its own shampoo it imports shampoo from Russia okay so you know it gives you and in fact the country that has thrived and all this is my native Belarus who actually did have a manufacturing base industrial and human capital and is exporting shampoo both to Russia and Kazakhstan and also other stuff what is a basic question what happened to all technology it's a little bit like in that Hollywood movie it's not a true story about weapons of mass destruction which turned out to be the scientist in Iraq so a lot of that simply are left the brain drain in the 90s is the big trauma and one anecdote has nothing to do with technology but with figure skating Russians love winter sports and in particular figure skating and there was one particular championship or maybe the Olympics where suddenly all the medals were not taken by the Russians it was a massive national alarm how come and now they started sort of public investigation turns out that all the coaches and trainers left in the 90s no children were going to the bases to be trained and they realized this is now a capital loss of enormous proportions that is important to the global superpower status so that's just one example of what was lost during the 90s underfunded forgot sold revamped so all the nice textbook theories of how in our factory producing tanks will now be producing frying pans didn't really materialize it was either there forgotten or still produces tanks which is of course a major also export item and technology they are here the people who are trained still are being trained by the generous state supporting system of education they work for corporations if the Russian corporations pays them more mainly they will go back but if it's an American or a European they will go to the US depends physics maths yes social sciences now well I hope you will join me in a second in thanking Anastasia and also Matt for acting as discussant just quickly before I leave you all a plug for next week's event where we will be joined by Johnna Montgomery from Goldsmiths who will be talking about the viable solution to the crisis of financialisation and also the final weeks that's the 6th of December will be hosting a lit panel on agrarian change and that we have leaflets here advertising that as well as giving you the full set up for next term so I hope you will join me in thanking both Anastasia and Matt and also join us in a reception drinks reception now in the senior common room over in the main building so thank you very much